Hedonic price analysis to reveal value of water in irrigation : an application to northern Malheur County, Oregon

Abstract:

Increasing water demand for growing municipalities, for water-based recreation
and for fishery and wildlife habitat has intensified pressure on the existing resource. Reallocation of water from existing uses to other, higher-valued uses is receiving greater attention due to constraints on development of new water supplies. A key to reallocation is identification of the economic value associated with existing and alternative water uses. A hedonic price analysis of farm sales in eastern Oregon is performed to reveal the value of water used in irrigation. Estimation includes a joint test of heteroskedasticity and functional form. The value of water is shown to be strongly influenced by the crop-growing-capability of the soil on which it is applied. The value of an irrigated acre is not significantly influenced by the source of irrigation supply. The implicit market price of
irrigation water in this area ranges from $44 per acre-foot (one-time delivery) on the best soils to $9 per acre-foot on the poorest soils irrigated.